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Trading Update: IQE REPORTS FINANCIAL PERFORMANCE IS ON TRACK TO EXCEED FULL YEAR EXPECTATIONS.

14 December 2016

Cardiff, 14th December 2016: IQE plc (AIM: IQE, “IQE” or the “Group”), the leading manufacturer of advanced semiconductor wafer products for the global semiconductor industry, today announces an update on current trading and its outlook for the year ending 31 December 2016 (“FY 2016”).

Since the announcement of its interim results on 13 September 2016, IQE’s trading has continued to be strong across multiple markets, particularly in the photonics business. As a consequence, the Group announces that it is on track to deliver FY 2016 revenue and adjusted1 operating profit ahead of expectations. It is anticipated that revenues will reflect a double digit rate of growth year on year, and that H2 revenues will be up sequentially over H1.

The wireless business has largely performed as expected through 2016 and remains on track for year on year growth. Photonics continues to be the fastest growing business segment, enjoying strong double digit growth year on year. Excellent progress with customer qualifications in photonics during 2016 provides a solid platform for continuing strong growth for this business. In response to this opportunity, the group has increased its capital investment in H2. InfraRed has performed in line with expectations, and license income has reduced from the front loaded income enjoyed in 2015.

Revenues, which are primarily dollar denominated, also benefitted in H2 from the devaluation of sterling following the UK’s EU membership referendum on 23rd June 2016. The currency impact on profitability is largely presentational as the majority of the Group’s costs are also denominated in dollars. The balance sheet impact is also presentational, as both non-sterling assets and liabilities will be translated at the year-end spot rate. This is expected to impact positively the presentation of shareholder funds. Furthermore, although the Group has de-leveraged its balance sheet during 2016 in underlying dollar terms, the presentation of this is expected to be distorted adversely in sterling.

As a consequence, the Board is confident that the Group will exceed current FY 2016 expectations for both revenue and adjusted1 operating profit. The Group will report its FY 2016 results on 21 March 2017.

Dr Drew Nelson, Chief Executive of IQE, said:

"IQE has made good progress in 2016, and is performing well against its strategic goals. The breadth of IQE’s technologies is a competitive advantage that is enabling its continued growth, and will provide a platform for strong cash generation over the coming years. I would like to thank the management and staff of IQE whose hard work and commitment have made this possible.”

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.